The last two calendar years have been outstanding for US equities. But we have seen some signs of reversal in sentiment around US market outperformance relative to other regions. The iShares Core S&P 500 (IVV) has recently trailed non-US ETFs like the iShares Core MSCI Emerging Markets ETF (IEMG) and iShares Core MSCI EAFE ETF (IEFA), advises Aniket Ullal, VP, ETF Data & Analytics at CFRA Research.
IVV had a total return of 24.5% and 26.3% in 2024 and 2023, respectively. The US-led advance was a tech-driven rally, with the “Magnificent 7” stocks accounting for 53% of the S&P 500’s total return in 2024. This investor enthusiasm around growth-oriented technology stocks was reinforced after President Trump’s election in November 2024, with initial expectations of more M&A activity and less financial regulation.
Source: CFRA FUNDynamix ETF platform. Data as of Feb. 20, 2025. *Trailing 12 Months.
But the 3% rise in the January CPI-all items index, released on Feb. 12, was higher than expected. Multiple executive orders on tariffs have reinforced these concerns of persistent inflation. Together, these developments have pushed out expected rate cuts by the US Federal Reserve to late 2025.
Since the first tariff announcements on Feb. 1 (which were subsequently paused), non-US equity ETFs like IEFA and IEMG have outperformed IVV. Gold, as represented by the SPDR Gold Shares (GLD), continues to be the best-performing major asset class recently, driven by demand from central banks.
